On December 30 of the previous year, the National People’s Power (NPP) successfully organized its Matara District Women’s conference, attracting a significant number of attendees. This event was widely regarded by political analysts as a turning point in the current landscape of Sri Lankan politics. The JVP, the key player in the NPP, being the primary or possibly the sole left-leaning party capable of exerting influence on local politics, had traditionally been limited to small, selected pockets of rural population.
However, under the NPP brand, it has steadily expanded its reach and has now become a formidable force at the national level. Leveraging strategic partnerships, they have now achieved independent momentum. The December 30 event was an ample demonstration of this fact. This development is particularly noteworthy considering that it marks the first instance of a socialist party gaining prominence since the perceived decline of socialism in Sri Lanka in 1977.
The current circumstances necessitate a discussion that intertwines business and politics, particularly due to the significant influence of a political entity like the NPP on the national economy. Let’s start with a bit of history.
he socio-economic policies of post-independence Sri Lanka have traditionally exhibited a fluctuation between right-wing and left-wing ideologies. Initially, the country was led by a right-wing Pro-British, Pro-American UNP government until a hartal, led by the socialist faction, disrupted the political landscape in 1953. This disruption resulted in the emergence of a more nationalist centre party that pursued a statist approach to governance in 1956. Notable changes during this period included the nationalization of ports, and transport services, and the establishment of local universities.
This regime was short-lived and came to an end with the assassination of its prominent leader. In the early 1960s, the government shifted towards socialism and forged alliances with left-wing parties. However, in the last five years of the same decade, the country underwent a shift towards liberalization, preparing for a more open economic system, which didn’t fully materialize.
In April 1970, Sri Lanka witnessed the emergence of the most economically left-leaning government in the post-independence era. The SLFP, the winning party in the general election, could form a centrist government on its own. However, it not only aligned itself with its Trotskyist and communist allies but also appointed its leaders to key positions within the cabinet. Dr. N. M. Perera, who identified himself as a Marxist (but, notably, not a communist) assumed the role of Finance Minister.
This period was, not surprisingly, characterized by a series of nationalizations, including the takeover of previously successful estates. The government also established state-owned enterprises to engage in business activities and implemented trade protectionism measures that led to severe shortages of goods. Furthermore, strict regulations were imposed, placing significant constraints on the private sector. The SLFP-led government also displayed a tendency to excessively rely on foreign aid from socialist countries, particularly the USSR and China, to develop local industries.
However, a significant number of these ventures were inadequately managed and failed to achieve the desired outcomes. It didn’t take long to see the detrimental impact of these socialist policies on economic growth, leading to a resounding victory for the opposition party in the subsequent elections. The opposition party, UNP, campaigned on the promise of establishing a market-oriented open economy. Its leader Junius Jayawardena is still treated as the father of the market economy in Sri Lanka.
The policies implemented by the 1970-77 government became distinctively unpopular among the masses, to the extent that no subsequent regime attempted to revert to them. Instead, every government that followed has steadfastly adhered to liberal economic policies, although some have maintained a parallel statist approach for political reasons. None of these governments have embraced socialism to the same extent as the 1970-77 administration.
t is worth revisiting this backdrop. Primarily because some of the NPP’s “mixed economy” policies appear to have a striking resemblance to the ones practised in the 1970-77 era. It is important to note that the party has not explicitly expressed any intention to reinstate the socialist and statist policies of that period. In their meticulously crafted propaganda materials, they assert their commitment to market-friendly economic policies. However, their persistent emphasis on state involvement and rural development serves as a clear indication that the eventual policies implemented may align with those pursued by left-leaning governments in various Asian countries throughout history.
One good example is NPP’s firm belief in developing the cooperative societies at a rural level to deliver retail services, at a lower cost, now done by the supermarket chains. They also believe in the state delivery of education and healthcare services, often questioning the need for the private sector to enter into these areas. On many previous occasions, they have stood against non-state privately owned higher education institutes. While they assure those extremist policies have changed, the reluctance of the constituency to readily accept them is understandable.
The timing of this development is of utmost significance. Under normal circumstances, a country oscillating between left and right extremes could be seen as part of the usual political landscape. However, the current situation is far from normal. In 2022, Sri Lanka experienced the most severe economic crisis since gaining independence. The chosen path of recovery has necessitated significant compromises in our economic policies.
As a nation, we have settled on a mutually agreed-upon plan with the International Monetary Fund (IMF). This plan includes measures such as strict control over money printing to keep inflation in check, implementing relatively high tax rates on the population, and reducing subsidies. At the same time, it is crucial to attract investors, which requires more flexible labour laws compared to the current rigid ones. All these factors point to one conclusion: this is not the opportune moment to experiment with new economic policies. Such actions could jeopardize the entire IMF programme and leave us in a much worse state.
The NPP has assured that in the event of assuming power, the party would remain committed to the IMF programme. Additionally, it has subtly suggested that a new government would engage in renegotiating the existing IMF agreement. Samagi Jana Balavegaya (SJB), the other prominent opposition party, holds a similar stance. It is understandable that when in opposition, it is imperative to highlight distinctions from the ruling party. The proposed renegotiations likely aim to secure more favourable terms regarding austerity measures, presenting an appealing promise. Sadly that is not how things would happen in the real world.
The Sri Lankan government has engaged in multiple rounds of negotiations with the IMF before reaching an agreement, leaving little room for further discussions at present. Any potential flexibilities have already been obtained through these negotiations. It is worth noting that the IMF initially demanded even stricter austerity measures. In practical terms, the IMF cannot be more accommodating. The only means of reducing austerity measures would involve resorting to money printing, a course of action vehemently opposed by the IMF. Therefore, the notion of renegotiations remains a mere wishful thinking.
It is important to bear in mind that the agreement reached with the IMF was not initiated by the IMF itself. It was initiated by the government of Sri Lanka. The IMF’s primary concern is not whether Sri Lanka will be able to overcome its economic difficulties or not. The IMF treats Sri Lanka in the same manner as any other member state, purely extending its services. Therefore, from the perspective of the IMF, there is no urgent necessity for renegotiations. If we were to insist on renegotiating, the IMF’s response would likely be dismissive. I am serious.
Sri Lanka is the party that stands to benefit from the agreement, not the IMF. If the IMF is dissatisfied with the country’s economic performance, no obstacles are preventing them from terminating the agreement. Consequently, it is the former that bears the responsibility for maintaining the relationship, not the latter. Furthermore, it is crucial to acknowledge that there will be no second opportunities if this arrangement fails to meet our expectations.
ithout a doubt, the NPP stands out among other political parties in its commitment to personal freedoms, despite its pro-statist stance. It not only acknowledges women’s issues but also actively works towards finding viable solutions through the active political participation of women. In contrast, other political parties tend to be predominantly pro-men in their approach. Additionally, the NPP demonstrates respect for the rights of marginalized groups such as the poor, minorities, and the youth. Throughout its history, the NPP has refrained from adopting a communal stance, even though it could have been an easy strategy to garner votes. The NPP recognizes the equality of Tamils and Muslims, without discrimination. Furthermore, it remains the sole political party in Sri Lanka that recognizes and advocates for LGBT rights, including the decriminalization of homosexuality. These commendable actions serve as an example for other political parties in Sri Lanka to emulate.
Figure Here:
Headline: Nolan chart of Sri Lankan politics
Despite the positive aspects, it is noteworthy that the NPP stands alone as the sole left-wing party on the Nolan chart, according to the author, while all other parties embrace right-wing policies at varying degrees. (Figure) Given the expectations set forth by the NPP to the general public, it is understandable that they anticipate some form of compromise regarding the IMF’s austerity measures. Maintaining this delicate equilibrium would prove to be a formidable challenge should the NPP assume power or join a ruling coalition. It is important to acknowledge that both scenarios are currently within the realm of possibility.
Building on the historical context provided in the article, it is important to acknowledge that Sri Lanka has implemented socialist economic policies in the past. However, at this critical juncture, revisiting such an approach presents significant risks. Moving forward, NPP must consider revisiting its current policy package and developing a set of more market-oriented and economically sound proposals if it aspires to lead the country effectively in the upcoming period.